nature box ceo gautam gupta on the future of subscription commerce
With a mission to “Discover a Healthier You,” NatureBox might sound like just another snack foods company, but it’s actually one of a growing number of businesses operating with a subscription business model. Just like at JustFab, BirchBox, and Dollar Shave Club, subscribers of NatureBox sign-up to receive monthly shipments of products. The success rate of subscription businesses has been spotty (Goodies, Walmart Labs’ subscription service, is shutting down) and so my interview with NatureBox co-founder and CEO Gautam Gupta digs into the viability of subscription commerce and where the industry is headed.
Prior to launching NatureBox in January 2012, Gautam was a Principal at General Catalyst Partners where he was actively involved with the firm’s investments in GoodData and PlumDistrict — and before that, he was with P&G. He and I connected after I had written a piece about ShoeDazzle for GigagOm.
Listen to learn:
- the story of how NatureBox got started
- how important is brand strength in a subscription business
- how some subscription businesses are really media companies in disguise
- interview: PIRCH CEO Jeffery Sears on Changing Your Brand Name
- building a subscription commerce brand
- has shoedazzle lost its dazzle?
Denise Yohn: Hello. This is Denise Yohn, and welcome to the Brand-as-Business Bites™ Podcast. The Brand-as-Business Bites™ Podcast gives you a taste of insights and information about brands, businesses, and the people who work on them. It’s available on iTunes. For more stuff for your brain to chew on, please visit my website at deniseleeyohn.com.
Every month I get a cool box of tasty, good-for-me treats delivered to my doorstep from a company called NatureBox. NatureBox is one of the many subscription commerce businesses that have popped up in recent years. And since this kind of company seems to have the potential to fundamentally change the way people shop, I wanted to dig into it a little bit more. That’s why I’ve asked the CEO and cofounder of NatureBox, Gautam Gupta, to join me for a conversation today.
Prior to launching NatureBox in January of 2012, Gautam was a Principal at General Catalyst Partners, where he was actively involved in the firm’s investments and startups like GoodData and Plum District. And prior to that, Gautam was at Procter & Gamble, so he has a great perspective to share about subscription commerce. Welcome Gautam.
Gautam Gupta: Thank you so much for having me.
Denise: Let’s start with some background. Why did you start NatureBox? Who is it for? What value is it offering?
Gautam: Sure. I actually started NatureBox really as an answer to a personal problem and struggle that I had growing up with obesity. Up until the age of 17, I was very overweight. I weighed 210 pounds when I was 12 years old . . .
Gautam: . . . and had very unhealthy eating behavior, ate junk food, and really didn’t understand nutrition. But about a year before I went off to college, I radically changed my eating behavior through learning about nutrition and sort of healthy foods, and the weight started to melt off. I lost 70 pounds within six months and have kept the weight off ever since. And so NatureBox, which is a brand of healthy snack foods, is really an answer to that personal problem that I had with unhealthy snacking.
And NatureBox is meant for everyone. Today most of our customers are moms who are trying to get rid of junk food at home so they’re trying to find better products for not just herself but the rest of the family. And that’s really . . . we take a lot of pride in sort of building the products that we’ve built to help moms do that.
Denise: Great. Now try to explain maybe as objectively as possible what you think differentiates your brand and your offering from other subscription services out there.
Gautam: Sure. When we started NatureBox, it was very important to us to build our own brand and really control the customer experience. We thought that being a subscription program raised the bar for what we needed to deliver to the customer. We had to earn the customer’s trust every month.
And so one of the key differences between NatureBox and other subscription commerce companies is that everything we send to the customer is a NatureBox branded product. It’s a product that we’re developing, that we are formulating in house, and we feel that we can stand behind that product.
So the main difference is that the experience a consumer gets with NatureBox is really from end to end being handled by NatureBox. There are no other companies, no other influences on the merchandise that the customer receives. Really what’s good for the customer is good for the business. And, you know, I think that’s really allowed us to build what we hope is a strong brand that can carry the business beyond just a subscription model.
We think subscription is very powerful, especially in the food category, where the need is recurring by nature. But we also think that subscription . . . not all consumers want to subscribe to a product or to a service. And so you really need a powerful brand, a strong enough brand that consumers want to buy in order to get them to start that subscription relationship. And over the long term, you need a brand that can operate outside of just the subscription framework, and that’s really what we think we’re building with NatureBox.
Denise: And I definitely want to talk about the future, but one of the things you said raised a good question for me, which is about your competitive set, so when someone is considering you, who are you competing with in your consumer’s lines and who are you positioning yourself maybe against?
Gautam: Yes. We think today NatureBox competes with the brick-and-mortar retail stores and large food brands. There’s not as much . . . in the food category, only two percent of the industry is being transacted online today. And so really what NatureBox is competing with is the 98 percent of the market that is being transacted offline, so the brands that are distributed through retail stores and the retailers themselves, Safeway, Kroger, Whole Foods, etcetera.
And so we really think about our business as trying to take some of the sort of share of mind away from a lot of the larger food brands like Frito- Lay, Kashi owned by Kellogg, the General Mills brands, and really give the consumer a better option and hopefully an option that is not just better for them and tastes better but also an easier and more convenient option.
So that’s really how we think about the competitive landscape with NatureBox. Today it’s really the brands that we’ve all heard of and that we’re all buying, and we’re trying to be an alternative to those.
Denise: Well, and that speaks, at least as an outsider observing, to the importance of having a really strong brand because you’re not competing with them on shelf where shelf space and assortment and price all come into play in the brand decision for a consumer-right?-whereas you’re actually . . . you need to have a brand that is in people’s minds before they get to the store almost. Would you agree with that? Maybe kind of asked more broadly . . .
Denise: . . . yeah, how important is having that strong brand because you’re subscription commerce?
Gautam: Absolutely. Yeah, it’s paramount. The strength and quality of the brand and the way that the brand resonates with the consumer is really paramount to success as a business. We’ll never be able to compete with the size of marketing budgets that Frito-Lay has, and so we have to do things a bit differently, and that’s really how we’re leveraging technology and social media to amplify our brand’s message.
At the end of the day, the quality of the brand and the way that the brand speaks to the consumer is of paramount importance because the consumer is inundated, especially in the food category . . . is inundated with messages from other brands. And so we have to convince the consumer that our brand of products is distinctive, it’s unique, it’s healthy but delicious, and it’s easy.
And we really have to deliver on those promises, and that’s why owning the supply chain and really having complete control over the experience is so important. We would not be able to do that if the products were not our own and if we didn’t know . . . if we weren’t involved in the process of creating those products.
Denise: My next question is going to be less about NatureBox specifically and more about the industry. You and I had initially connected over a piece I wrote about ShoeDazzle and the role of brands in subscription commerce. And I wanted to hear your thoughts about the current state of subscription commerce and kind of the future growth potential. Is it a viable model in the long term, and how do you think it’ll change over time?
Gautam: Yeah. We think subscription is undergoing some very interesting changes right now, and it’s a very interesting market that has a lot of untapped promise and potential. And so the way that I see the market sort of as it is today is that there are really two types of subscription commerce companies. There are the companies like NatureBox building their own brand and really thinking about their business as a multichannel brand with subscription as part of the way they engage the consumer as part of the strategy but also considering things like retail distribution. And so we see a lot of companies in that space. NatureBox would certainly be one that would fit in that category. ShoeDazzle, Julep would be others that again fit into that category of really controlling and trying to build a brand.
The second category is what we refer to as sample boxes, and these are folks like Birchbox that are going out and really being a sampling agent for other brands and providing distribution to the end consumer. I think that these businesses have actually a lot of challenging times ahead of them, and the reason for this is that as competition comes in, it’s really a fight for supply, and larger brands tend to be the ones that have enough of a marketing budget to supply samples at low or no cost.
But small brands are the ones that tend not to have that type of budget, except that the sampling boxes that are out there have really marketed themselves as being an agent o discovery for the consumer, but there’s the conflict-right? Between the supply constraint and only being able to really tap into the large brands that have much more brand awareness and that sort of challenge of delivering a new, unique, and sort of serendipitous experience for the consumer.
I think that these businesses like Birchbox end up becoming media businesses, and I think Birchbox goes to a large beauty brand and says “give me 10 million dollars of your budget this year,” and part of that is going to be sampling, part of it is going to be creating content and content marketing, and part of that is going to be intelligently sort of branding and marketing the products online and driving sort of online traffic and sort of website traffic. And I think that that’s the way those businesses need to evolve to sort of grow and create something that could be 100, 200-million dollar revenue type of business.
Denise: And it’s very different. Being a media business or a marketing company, you build a very different brand, and your value proposition is very different from being a products company, to your point, where you are actually creating a brand, creating a brand relationship, and then selling through multiple channels, perhaps one of them just happening to be subscription.
Gautam: Exactly. It’s very, very different, and ultimately I think they both can be great businesses, but I think the difficulty with some of the sampling folks is they’re trying to sort of be both, and I think that’s a very difficult proposition to pull off.
Denise: Yeah, pick one and do it well. Well, Gautam, this is such a fascinating topic. Thank you so much for sharing your thoughts with us today. For my listeners, I encourage you to check out NatureBox. You can go to its website, Facebook page, or Twitter, and you can also connect with Gautam directly. His Twitter handle is gRamblings, so g-r-a-m- b-l-i-n-g-s. Gautam, thank you again. Really appreciate your time.
That’s it for today. Thanks for listening to the Brand-as-Business Bites™ Podcast. Be sure to subscribe to the podcast on iTunes so your brain will always be filled with good stuff to chew on. For more information or to contact me directly, please visit my website at deniseleeyohn.com. Take care and thanks again.